There is a lot of cash back refinance promotion from lenders with extremely attractive interest rates and cashback up to $4,000 AUD.

Why should you refinance?

1. The better interest rate with the new lender: with the better interest rate, your monthly repayment is lower, and it means you can pay more into your principle (given you make the same repayment as previously). Consequently, your mortgage is paid off quicker.

Example: Current mortgage $400k with an interest rate of 3.59% and monthly repayment is $1,816.33.

If refinance with a new interest rate 2.78%, you only need to pay $1,639.33 monthly, mean you can save $177.01 each month. And if you keep the repayment of $1,816.33, you can pay off your mortgage 52 months (or 4.3 years) earlier. Get access to the refinance saving calculator here.

2. Consolidate debts: If you are carrying a lot of high-interest debt, rolling it into a new mortgage, could see you end up with lower payments.

Example: You have a personal loan $10k with an interest rate of 10% and a monthly repayment of $213; a car loan $20k with an interest rate of 9% and a monthly repayment of $415; a home loan $400k with an interest rate of 3.5% and monthly repayment $1831. You can consolidate all of these debts into a new home loan of $430k with a new interest rate of 2.78è your new monthly repayment is only $1762.

3. Cash-out: you can put the cash-out funds into good use and look to make some improvements to your current home or investment property – potentially adding value above and beyond the cash-out amount việc refinance.

4. Cashback promotion: all year round, lenders (even low doc lenders) have a lot of cashback promotion for refinance to attract clients. The cashback amount can be as high as $4,000 each refinance loan.

Things to consider before refinancing? 

1. Associated costs with refinancing: it is not only the interest rate, you should consider all the fees and costs associated with the refinancing including but not limited to: package fee; application fee; valuation fee; mortgage transfer fee; exist fee; etc.

2. The current loan with fixed rate: if your current mortgage is fixed, you should consider the beaking cost related to existing the fixed term. If this amount is more than the benefit you are going to get from refinancing, consider just to do the refinance but set the settlement date when the fixed term due.

3. Valuation: The valuation of your property may come back lower than you expected

4. Loan to value ratio – LVR: You can only borrow up to 80% of your property’s value before being forced to pay LMI (Lenders Mortgage Insurance). Therefore, consider the LMI cost before refinancing if your LVR is more than 80%.

5. Cash-out: Before considering any type of cash-out or equity release where you’re home is at stake it is important to closely consider what you intend to do with the funds. Lenders will ask for evidence when your cash out amount is more than a specified number (example for NAB is more than $150K).

5. Repayment term: as refinance, your loan term will be restarted – 30 years. It means that if you make the new repayment amount – it takes more time to pay off your mortgage. To pay off your mortgage faster, Trusted Finance suggests you maintain your current repayment. You can also consider using an offset account/redraw facility to pay off your mortgage.

6. Financial hardship: if you are in financial hardship, you should not refinance as this is a new mortgage application process with a new lender. They are asking for your income and expense information. If you are in financial hardship, it is just a waste of time to apply for refinancing. Instead of this, you can ask the broker for new pricing for a better interest rate.

In summary, before considering if I should refinance? Ask yourself the following questions:

  1. Current interest rate? What are the interest rates on the market?
  2. Is your current interest rate fixed?
  3. Is your LVR above/below 80%?
  4. All the possible related costs and fees?
  5. Is your financial situation good?

The best place to start is to speak with Trusted Finance teams let us assess your situation and find out the most suitable solution for you!


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